Monday, October 15, 2012

Product management is not just about looking at new requirements and new development. The major role of product managers is to increase the value to the product - i.e., increase profitability of the product, thus increase shareholder returns.

From a product management perspective, there are several levers one can exercise to improve the value of a product.

1. Change Product's Price

Increasing or lowering a product price will change the customer's perceived value of a product. Often times, we see prices being lowered to encourage sales volume increases. But there are cases when the price is increased to reposition the product into a different market segment. For example Hyundai increased the pricing of Sonata car to India reposition the car as a premium product.

A common way to change product pricing is to introduce a new SKU at a different price point and withdraw a similar SKU. For example, in consumer products such as Soaps, companies introduce a different package - say pack of 3 instead of 4, and lower the price per pack - which effectively increases the actual product price.

2. Improve Current Product

Adding new features or functionality that customers will truly value enhances the product value - which can translate to higher sales or higher margins. Many times, even improving product design for esthetics and/or for usability will give the biggest bang for the buck.

3. Introduce New Products or Product Variants

With time all products become old and stale. To keep up the product's relevance to market, new products has to be introduced. These new products can either be:

a. New product or product variants that fill gaps in the current price/performance space.
b. New products or product variants that address the needs of new market segments;
c. Existing products with new designs and/or with updated features;
d. Radical innovative products that leapfrog existing products;
e. New SKU's that create new market segments or create new value segments;

4. New markets for current products

Finding new markets for current products is also a popular way to enhance the product value. Initially, the product is often sold only in the home markets, later new opportunities can be found by exporting, or setting up marketing/sales/manufacturing in other countries.

5. Improve Customer Service & all aspects of customer interactions

The value perceived by customers can be drastically enhanced by improving customer service. For example, setting up a toll free number to address all after sales issues, or providing after sales training, or support in product installation, or on-site service etc. Improvements in on time delivery, streamlined ordering, billing, & other transactions will enhance the product value with customer and thus strengthen customer relationships.

6. Supply Chain optimization

Once the product is released and has customer acceptance, it is time to optimize the cost of operations. This is done by supply chain optimization - by finding out new ways to reduce manufacturing/distribution/sales costs - without impacting the quality of the final product or the customer service/interactions. Optimizing the operation costs directly adds to the bottom line and hence to the value of the product.

7. Marketing & sales initiatives

Marketing & Sales initiatives can create new markets for the product. New advertisement campaigns can increase sales, New sales channels can increase market penetration and address new markets. Marketing messaging and product positioning has be constantly monitored and tailored to create positive image for the product, reinforce the competitive advantages, and influence/change the way customer's purchase decision.

Closing Thoughts

Product managers can use any of these levers in any combination to increase the product value. How these levers can be used and what parameters to choose is often guided by the overall product strategy.

As there are no easy way to choose these levers, it takes a whole lot of experience, customer interactions and deep business knowledge to be successful product managers.

The last 4 years in the mobile markets has seen a rapid market transformation - caused by a disruptive innovation in smart phones. The innovators, namely Apple and Samsung/Google have seen their sales & profits increase in double digits, while Nokia and BlackBerry are saw a rapid decline in revenue & profits. All this happened at a time when the global economy was barely growing, while Europe & Japan were in recession.

The story of innovation and market disruption in smart phone markets will be studied extensively and there few things that has to be noted about the winners in this battle.

On one hand Apple was the disruptive innovators, who challenged the status quo with touch based mobile phones. Samsung on the other hand was a fast imitator. Samsung's innovation strategy can best be called as Innovation by Imitation .

Japanese and Koreans have mastered the art of Innovation by Imitation, and Samsung was relentless in developing new models & variants of Android OS based touch phones. To the extent that for every one model released by Apple, Samsung released 8-10 models of touch phones, and in the process became a market leader in Android OS based smart phones.

Consumers were enamored by the touch phones with its jazzy Apps, which helped Apple and Samsung increase their revenue and profits. This was a case where companies were able to innovate their way out of recession.

The success of Apple & Samsung had a negative fall out on Blackberry and Nokia. The success of iPhone and Samsung Galaxy forced a recession on Nokia, Blackberry, Sony-Erricson, & Motorola. It was not that Nokia or Blackberry or Motorola were not innovating. These companies were slower on innovation and concentrated on optimizing the value chain to drive down costs. Nokia was spending immense resources to develop low cost phones for developing countries on its Asha range of phones. Blackberry was developing new range of technologies to improve and optimize the Blackberry network for enterprise data communications. By the time Nokia and Blackberry reacted to touch phones - with their own versions of touch phones, it was too little & too late.

Though Motorola was an early adapter of Android OS and released Droid phone, Motorola could not keep pace with Samsung and eventually Motorola was sold to Google.

Lessons to be learnt

One key lesson to be learnt from this experience is:

1. Disruptive Innovation can help companies beat recession.
2. If you are not a disruptive innovator, be a fast imitator.

Tuesday, October 09, 2012

Facebook recently launched a new feature - where one could promote their post of Rs 99 in India or $7 in the U.S. In return for the money, Facebook ensures that the 'promoted' post remains at the top of the 'wall' of all 'friends', thus increasing the likelihood of your 'friends' and 'subscribers' seeing it.

This is definitely opens a new avenue for companies who want to advertise to their 'fans' - but this could also turn people away from Facebook, and customers may choose not to follow a particular business.

Facebook's new feature solves one of the problems noticed by the users:

"Every day, news feed delivers your posts to your friends. Sometimes a particular friend might not notice your post, especially if a lot of their friends have been posting recently and your story isn't near the top of their feed," wrote Facebook's Abhishek Doshi in a post announcing the test.Stressing the need to promote a post, Doshi adds, "When you promote a post – whether it's wedding photos, a garage sale, or big news – you bump it higher in news feed so your friends and subscribers are more likely to notice it."

However, I don't think individual users like you & me will be the ones who will pay to promote their posts on Facebook, instead it will be the companies which have their Facebook pages who will be paying to market their products/services on Facebook. Companies will be able to target their messages to their customer - who have 'liked' the company's Facebook page. If Facebook offers access to the data analytics on how the 'promoted' posts are faring - then it will make it even more attractive to advertisers.

Facebook should ensure that users can turnoff the promoted posts - if they don't want to see it at the top on their wall. Giving control to users is the key to success. Else user walls' can get swamped by promoted posts & crowding out the real posts from 'friends'.

This opens up a new challenges & opportunity for advertising over social media. If Facebook executes well on this, then Facebook can become a serious competitor to Google.

Friday, October 05, 2012

Recently a Fortune-500 company started a new product development of a new software that will manage multiple data storage system and data management system run on a cloud. This was a multi-year endeavor. Developing the final product will require several software development projects, product integration and testing. The product will be developed by multiple teams working in many countries.

From a product development perspective, One of the major challenges here is project management. Managing a complex development and keeping everything on schedule is a huge task. In order to ensure successful development of the new product, Product managers will have to rely on Program Management Office(PMO), to oversee all the associated projects and present the overall program status to product management and top executives.

As product managers, it is important to know the role of PMO and the value it provides. In this article, I will describe the role of PMO in new product development.

Program Management Office

Developing complex products involves multiple projects. These projects have several interdependencies. The top management cannot dive into each project and understand the project operations, instead a Program management office is created as an intermediary between various project managers and top management to help top management make the right decisions.

PMO reports to the business management or product managers. The business management or product managers now have the visibility to the overall program status and can take appropriate decisions regarding budgeting, resourcing, staffing, Go/No-Go decisions etc. in a timely manner such that the project schedules are not impacted.

Value of PMO

PMO provides a very valuable role in business. PMO ensures that all projects are aligned with the strategic objective. PMO ensures that all assumptions made in the business cases are validated and appropriate decisions are made during the development stage in a timely manner. The benefits of PMO:

1. Empowers the business to make Go/Kill/Fix/Hold decisions on projects/programs
2. Provides an early warning of any potential problems in projects/programs
3. Provides all relevant project/program information to stake holders
4. Gives a better understanding of resource utilization, ensures right staff is deployed on the right projects
5. Helps stakeholders understand the financial impacts of an under performing project.
6. Optimizes resource utilization - by moving resources quickly based on accurate real-time information.
7. Helps board level executives to take better & faster decisions based on real time data.

Closing Thoughts

Identifying market opportunities and creating new products that exploit market opportunities can be a daunting task. Organizations can become bogged down with several projects and projects may get mis-aligned with the strategic objectives. Program Management Office is required to ensure that all the ongoing projects are aligned with the strategic objectives and empowers top management to take the decisions in a timely manner.

PMO plays a very important role is creating a repeatable & successful product development process, identifies project deficiencies and helps take the quick decisions as a team. This helps in a big way to make successful product development a repeatable process.

Thursday, October 04, 2012

Recently, I was giving a talk on innovation and a person in the audience asked me the question: Why diversity is important for Innovation?

Many people in the audience were initially amused by the question. It sounds so obvious that diversity helps innovation, but when I turned the question back to audience, they was whole lot of discussion on the subject. The outcome of this discussion is documented in this article.

Today, in the global world, everyone agrees that successful innovation is the key to profitability. And innovation requires smart people with better ideas. Herein lies an intuitive and the most powerful force for innovation: Workforce diversity.

Almost everyone agrees that diversity is good for innovation, but most people cannot reason out on how diversity helps innovation or explain why diversity helps innovation.

Introduction

At the first glance, innovation has nothing to do with diversity. A lone inventor working in a lab gets his "eureka" moment and he goes on to create a path breaking invention. In that environment there was no diversity & yet innovation happened. So at the first glance, diversity has little to do with innovation. This was the situation in the industrial age (1850-1920). Thomas Edison, Henry Ford,Alfred Diesel, Nikola Tesla, were all strong individuals who were the beacons on invention. The term "innovation" was not invented yet.

But then, when we look little deeper at the invention, and the process of invention - the need for diversity becomes clearer. Let take a simple example of Edison's invention of light bulb as an example. The first light bulb created by Edison was made of a carbon fiber held between to electrical points in a vacuum glass bulb. Thomas Edison did not even invent one single item that made up the light bulb, his invention was in effect a recipe of putting various things together that made the light bulb work. Edison worked on proven concepts and ideas. Humphry Davy from UK has proved that electricity can be converted into light - by passing high voltage current through a filament of platinum. Another British scientist Warren de la Rue demonstrated that vacuum environments is necessary to longevity of the filament. American inventor John W. Starr proved the use of carbon filaments in light bulbs. The glass itself was originally invented by Arabs and perfected by Venetians. Now when we look at all the people involved in creating various components that make up the light bulb, it becomes clear that a lone individual could not have invented the light bulb. The final invention was a culmination of efforts of a diverse set of individuals.

Now in 21st century, things are not too different - though the pace of innovation has increased tremendously. What used to take a decade to develop in 1900 is now developed in a year. The technical complexity needed to solve a problem has also increased tremendously. The only way to address the need for faster pace and handling technical complexity is talent. We need more number of intelligent people to innovate. Getting the best talent means getting people from different parts of the world - in other words get a diverse set of people to work on the big problem.

For innovation to happen people have to share their knowledge and work together.

Basic definitions

To understand the benefits of diversity in Innovation, first we need to define and understand a few key terms:
1. Diversity
2. Innovation
3. Successful Innovation.

What is diversity?

Diversity is defined as a group of people who have differences in race, gender, ethnicity, physical capabilities, and sexual orientation - social or political differences.

What is Innovation?

Innovation is defined as development of new solutions that needs the needs of customers, where new solutions offer greater value to customers. Innovations can be a mix of products, services, technologies and ideas. Innovation differs from invention in that innovation refers to the use of a better and, as a result, novel idea or method, whereas invention refers more directly to the creation of the idea or method itself. (source: Wikipedia)

What is Successful Innovation?

Successful innovation is the innovation that gives greater value to the innovator - i.e., the innovation that gives greater profit/benefit to the innovator than the other alternatives. Often times successful innovation is most often characterized by financial success.

Why have diversity?

Diversity is a good thing, but are there reasons to have diversity? In my opinion, there are three major reasons for diversity:

Speedup Innovation

Innovation requires quality talent and in right quantities. As the pace of innovation increased, there is the pressure to innovate faster, this implied that more talented people are needed. Good talent is tough to find in one single location. Immigration laws have hindered people movement, companies are forced to open multiple R&D centers all over the world to attract the best talent. Companies such as Intel, Cisco, Microsoft, Google, EMC, GE, Roche, etc., have setup R&D centers all over the world. Now companies have centers in USA, UK, France, India, China, Israel, Russia, Australia, Korea, Brazil and host of other countries. These global R&D centers collaborate to speed up innovation.

Tap into specialized Skills

When we look around the world, we find that not all the skills are available in all countries in equal measures. Some countries have specialized in certain technologies or certain skills. This specialization has allowed countries to create a competitive advantage. For example, France has specialized in Aviation & Nuclear energy. Germany has specialized in Automobiles and heavy engineering. USA has specialized in Software, Biotechnology, & Semiconductors, India has specialized in software and heavy engineering. China has specialized in manufacturing.

Innovation needs multiple skill sets. So when companies look for skills, they need to set up R&D centers in countries which has those skill sets or get people to immigrate to a central R&D center. For a long time California was a hot bed of innovation - because companies could get people from all over the world to work in California, but with changing immigration rules, companies are forced to set up multiple R&D centers.

Get different perspectives

Today. Customers are global, products are global. A new product - say Samsung Galaxy phones are being used world wide over and by people of all ethnicity, cultures, genders, etc. So when the products have to be sold to a diverse set of customers, the product development team will need different perspectives - and the best way to get that is to have a diversity in the innovation teams.

People with different skill sets and with different cultural backgrounds see different problems and solutions. Getting multiple perspectives to the problem helps to create new and better solutions. To understand this, consider the example of Samsung's Galaxy cell phones. Samsung understood the need to have a global perspective for its smart phones and developed phones with different designs - There are several designs of smart phones instead of having one standard design. The phones in some markets allow dual SIM, so that people can use the same phone with multiple carriers, the user interface & screens are customized, and the phones are priced differently as well. The range and diversity of Galaxy phones led to the success of Samsung in Smart phone business.

Diversity also brings in sensitivity towards different customers & markets. This helps in avoiding cultural blunders when developing new products. If GM had Mexican engineers in its team in 1970's - it could have avoided the 'Chevy Nova' branding blunder.

How diversity helps in creating successful innovation?

We know that diversity can help innovation, but can diversity help in successful innovation?

To answer this, we need to understand the word "success".

In simple concepts of economics, success is maximizing the increase in economic output with minimal increase in inputs. Where the economic inputs are capital & labor, and output is sales revenue. This basic principles explains why governments and companies like to increase spending on education and R&D.

Synergy of Ideas

Diversity brings in different perspectives and different ideas and these ideas can be combined in many ways. Diversity helps pick the right combination of ideas that can address different markets. For example, at EMC, two teams of engineers developed two products - Atmos, a cloud storage system and Smarts a network management software. Another team saw both the ideas and saw value in combining the two products that enhances the value of Atmos. The new idea did not cost much - but the value was very high.

Enhance Organizational Efficiency

Diversity also improves organization efficiency in many subtle ways.

1. Easier to attract talent.

Having a diverse workforce will help attract talent - which lowers cost of hiring & helps towards innovation.

2. Management Processes

People from different cultures bring with them different management processes and techniques.

3. Understand market requirements & help enter new markets

People who share the same cultural background as the customer will understand the needs and nuances of the market better.

4. Improve customer service.

Better understanding of customers leads to better quality of service

5. Improves investment climate.

Diversity in the management & leadership levels will make it easier to attract capital from different markets/investors.

Increasing corporate profits

The big benefit of diversity is that when innovation projects are well managed, it helps increase market size, lowers costs of development and can increase revenue in a big way. With proper management, diversity can be used to increase corporate profits & shareholder value.

Closing Thoughts

The globalization of business has created a hyper competitive and a complex business environment. To be successful, companies now need to create new products and services while lowering the cost of development. The best way to do that is to have a global, diverse workforce.

A diverse R&D team is a necessity for innovation and to develop global business strategies. Having multiple voices will lead to new ideas, new services, and new products, and encourage out-of-the-box thinking. Today, companies no longer view diversity and inclusion efforts as separate from their other business practices, and recognize that a diverse workforce can differentiate them from their competitors by attracting top talent and capturing new clients.

Innovation provides the seeds for economic growth, and for that innovation to happen depends as much on collective difference as on aggregate ability. If people think alike then no matter how smart they are they most likely will get stuck at the same locally optimal solutions. Finding new and better solutions, innovating, requires thinking differently. That's why diversity improves innovation.

Monday, October 01, 2012

Product managers are responsible for driving new product development. In the world of product management, there are several types of new products. There are many different types of new products. New products fall into six major types:

1. New to the world products

These are really revolutionary products that breaks new ground in terms of innovation. For example Sony Smart Watches, Instagram, Yahoo Search, Hotmail, Apple iPad, Garage Band etc. These products create a new markets for the product. Today, such new products constitute ~10% of all product releases.

Developing such new products are extremely risky and only 4 or 5 out of 100 will survive the first two years in market.

2. New to the company products.

These are products that helps company enter new market segments. The market For example, Blackberry Storm was the first touch phone for Blackberry. These new products are often seen as me-too products, and if the new product does not offer value to the customer & does not distinguish from the current market leader then it will fail in market place. So companies spend lots of money/efforts on market research and product development to create truly differentiated products. E.g.: Gmail, Google search, Android - are all new to the company when introduced and Google spent a lot to make these products better than the current market leader.

On the other hand, there are companies that try to draft behind the market leader by creating a lower cost, imitation products that typically follows a me-too market strategy. This typically happens if the entry barriers are low and the products does not have strong differentiating features. E.g.: Rediff Email, ZTE cell phones, etc.

3. Additions to existing product line

Companies often add new products to existing product line to address needs of adjacent markets - the markets that is currently not being served by the current range of products. For example, Samsung Galaxy Note was a product like extension, but it addressed the needs of business users of Smart Phones. Another example is Amazon's Glacier storage service - which is an extension of Amazon's Simple storage Service.

4. New SKU's

Companies can create new products by introducing newer SKU's of existing products. For example, Software companies such as Microsoft sells software packages based on number of users, so there will be different SKU's for 50 user license, 100 user license 1000 user license etc. By creating new SKU's companies create product differentiation in terms of pricing. Typically a smaller SKU will have a lower price, which attracts newer sets of customers.

5. Improvements and Revisions to existing products

When a company introduces its first version of its product to the market, it may not have all the features or functions needed, Often times the first version of the products may not even succeed in the market. But companies can keep improving the product and release several revisions to the existing product and succeed.

For example, Samsung's Galaxy S line wasn't an overnight sensation. But the company coupled steady improvements to its flagship Smartphone line with a steady drumbeat of commercials, billboards, banner ads, and other promotional effort to build up its reputation. Now, it's second only to the iPhone in its ability to draw the attention of consumers.

Once a product is proven in the market, the seller may redesign/rebuild the product such that it costs less to manufacture. A part of this cost reduction could be passed on to customers - thus lowering the price and changing the market segment into which the product could now be sold to. For example, the price of laptops have dropped steadily - this with every drop in selling price, the laptop computers gained more market share from the desktop users. Large Screen Televisions: LED/LCD/Plasma TV's from Sony or Samsung have also followed this price skimming strategy - where the price of the TV drops steadily and with every drop, it attracts customers from a newer and a bigger market segment. Large screen LED TV prices have dropped from $15,000 to $1000 in last 7 years. In the process, the large screen TV's moved from a niche luxury product to mainstream product.

Closing Thoughts

Introducing new products is one of the major roles of product management. But new products may not always mean developing new technologies. Often times it could just mean a product revision or a product extension or new pricing or new packaging. All these activities must be planned by product managers and direct its execution.

In last two weeks, Internet was flooded with articles, blogs & videos on Apple's blunder with Maps and other bugs. The customer reaction on Apple's iPhone5 launch was not what was expected based on previous launches. So I took a deeper look as to why people gave a negative response to iPhone5 in the media, but the sales numbers indicated otherwise - Sales of iPhone5 broke all previous records.

After deeper analysis, I found a few startling facts:

1. The most loyal customers were the ones screaming the loudest.
2. Customers are still buying Apple's iPhone5, but they are not as excited/happy about it as before.
3. This is an early warning to Apple to fix a few things.
4. Apple is behaving like a Goliath & People despise Goliath.

Apple has cultivated an eclectic mix of customer - from techno geeks, businessmen, & artists. These customers are also the most demanding customers. So when Apple makes small mistakes, they get very angry, express it very vocally and have the means to express it loudly. The geeks, artists & journalists - in particular have the ability to shout the loudest in the Internet world, and have used it to raise their voice of complaint on product's short comings.
Also see:Apple is Losing its Innovation EdgeApple loses its way with Maps

In last five years, Apple has not developed iPhone's user experience. When iPhone was first introduced, it heralded a new era of multi-touch interface and opened a new world of Apps. Since then Apple has done little to improve the user interface and user interactions on iPhone. The only commendable enhancement was 'Siri'. Apple has not fixed various 'quirks' in the product - like the need for iTunes to mange iPhone, limiting 5 iOS devices per user account etc. As a result, for the most demanding customers, Apple is not innovating enough, customers are getting bored and are irritated. So when a small thing such as Maps fails, customers are getting agitated and are making big noise about it. Apple's customers are bored after 5 years of the same user experience. Customers are looking for something that is new & exciting.

Apple is also slowing down the pace of product innovation and is now seen as a laggard than a leader. To illustrate, consider this:

1. Apple iPhone was not the first to support 4G LTE & still does not support all forms of 4G.
2. iPhone is copying Samsung with a bigger display.
3. iPhone was not the first to have multi-core processors. Apple lags behind Android phones when it comes to CPU & Memory capabilities.
4. iPhone's memory of 16GB, 32GB, & 64GB was good 5 years ago, but with faster Internet and millions of apps, the iPhone is running out of memory, and iPhone does not allow extending memory.
5. Power users want true multi-tasking, and iOS does not deliver.
6. Business users are finding several limitations on device security & usability.
7. Apple still does not support stylus inputs - like Galaxy Note.
8. Apple lags Windows 8.0 in terms of support to Office suite, and Windows 8.0 has better integration with other Windows based business applications.

With this kind of limitations, Apple cannot hold on to its claim of Technology leader and command a premium market position. (See: Apple's market positioning)

Apple's iPhone is falling behind in terms of technology and usability when compared to its competition. So many of Apple's leading customers are unhappy and are making big noise about it.

iPhone now has a much wider customer base, and Apple's tight control over the App market space is not helping. Apple's insistence on 'Disney' like standards was good five years ago, but as the customer base grew, not all customer like to toe the 'Disney' line. Customers are demanding access to a much wider choice of apps and app market places. Customers now want access to a much wider range of apps & access to multiple App stores. People don't like to be constrained by Apple's restrictive & closed market ecospace.

Lastly but very importantly, Apple public behavior against Android is making people hate Apple. American public in general like the notion of supporting the little 'David' against the fight with 'Goliath'. For a long time, Apple portrayed itself as the 'David' in computing field and customer went with it. So when iPhone was release, iPhone was the 'innovative David' and consumers embraced it. But in last two years, Apple is behaving more like Goliath, suing every other Android phone vendors - who are much smaller players in US market. All the legal disputes are done in public domain and Apple is going after Google's free Android has made US consumers belch in disgust. The nastiness of Apple's behavior in the legal disputes is making a serious dent on Apple's image in the minds of US consumers. So when the new Goliath makes a small error, people are jeering at Apple .

Apple has been extremely successful in last 5 years. Now, Apple is the world's largest technology company, the worlds most valuable company and is no longer a little maverick who was challenging the dominance of IBM/Windows. Apple now dominates the market and is being seen as the new Goliath - which could be very bad in terms of public image and customer relations.

Closing Thoughts

The recent public outburst against Apple was just a warning sign of some deeper problems in the iOS world for Apple. Slow down in the pace of innovation and having a very restrictive terms is creating user discontentment. If these problems are not addressed immediately, Apple will lose its prominence in mobile computing space.